Mar
9
Stimulus Package, To Be or Not To Be…
Filed Under Uncategorized
So it’s over, the Stimulus package is signed by Congress and President Bush so the economy is going to be just fine…Right?
Fortunately what is going on in most of the country regarding real estate trends is not what we are experiencing for the most part on the Monterey Peninsula. However, there are pockets of our low end markets that are suffering greatly. When you look at markets like Seaside, Marina and Salinas you will see a much different picture than what Carmel and Pebble Beach are experiencing. In fact, I showed a house yesterday that was just reduced to $349,000, what a bargain! Only the Sellers had paid about $650,000 for it just 3 years ago. So there end lies my question about the Stimulus Package. I almost felt myself having a Michael Moore moment, “So just who is this stimulus package helping?” As part of the new Stimulus Package there is a new Conforming Loan Limit guideline for FHA mortgages. This is obviously great for the new Buyers coming into the marketplace. This will allow them to afford more or even just qualify for a loan. The problem in the last year or so is that with the increased loan qualification process no one could qualify for a loan over a Conforming Loan limit of $417,000 in our area. Therefore, homes that were selling in access of $500,000 were no more, the prices had to come down to accommodate the Buyer that was qualified in the Conforming Loan limit range. And yes, this is good for them.
The thing I don’t understand is that when I was at the CAR conferences in Indian Wells, CA this January they were all excited about passing this new Conforming Loan limit. They said it would decrease the amount of foreclosures on the market by up to 210,000 in the State. That is the part I don’t get. The reason I don’t get it is because no matter what the loan limits are, if the house is not worth what the owner’s owe on it, they will still not be able to refinance it to save it from short sale or foreclosure. Take for example the house I showed yesterday, they must owe more than $350,000 on it if they purchased it for $650,000 three years ago, so how would this new Conforming Loan limit help them?
I am very optimistic about the real estate market this year. I have been busier this year than I have in the last two years, but I think we need to be realistic about what certain tools will allow given the marketplace. Obviously, given the fact that I’ve been busier than in the two years means that others are seeing this as a prime buying opportunity as well. So let’s use these tools to our advantage, but not have any mis-givings as to their limitations.
Kim,
The jury is still out as to who will be helped by this economic simulus package. As you mentioned, and it is the same in our area, the old conforming loan limit of $417,000 was not adequate for the majority of the purchases. First time home buyers in our area will now be able to get better loan rates and more flexible qualification standards. This will be good for them.
Another group of winners will be those who will be able to refinance their existing loans into new loans with lower rates.
As for those homeowners whose home values have declined below their outstanding loan amounts…there is nothing in the stimulus package to stimulate them. They remain unable to refinance, unable to sell and pay off their loans, and they remain candidates for foreclosure.
John
My heart goes out to the truly unfortunate souls who bought the American Dream…a new home…and saw the value fall below their loan balance. This govenment stimulus package is not going to be much help to them.